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By the standards of pay revolts, the vote against Chris O’Shea’s £8.2m severance package at Centrica barely registers.
However, it was never a good idea for the chief executive of a utility company, which is reaping a windfall as the UK emerges from an energy crisis, to be awarded such a package.
When it comes to executive salaries, O’Shea occupies a particularly sensitive position.
It was at British Gas, owned by Centrica, that Britain’s aversion to big pay emerged in 1994, when then-boss Cedric Brown was lampooned as “Cedric the Pig” after his pay soared 900 per cent in the following decade. to privatization.
The dispute eventually led to Adrian Cadbury’s first attempt to codify governance.
Payout: Centrica boss Chris O’Shea earned £8.2m last year as energy giant made windfall profits
O’Shea has graciously admitted that the combination of his salary, bonus and shares was “an enormous amount of money” and that he was “incredibly lucky.”
The 9.9 per cent vote against the pay deal should be seen as much of a rap on the knuckles for Centrica’s governance as it is for O’Shea personally.
It is the beneficiary of a more than 300 percent rise in share price from the post-pandemic nadir.
Excessive board salaries in the UK are driven by two forces. Many bosses are paying attention to what is happening on the other side of the Atlantic, where there is a different attitude towards wealth.
The temptation of bigger paychecks is one of the factors that led plumbing group Ferguson to cross the Atlantic and has caused problems for the board of medical device supplier Smith & Nephew.
The second factor is the compensation culture. Centrica’s head of payments, Carol Arrowsmith, is a former senior partner at Deloitte, where she advised many FTSE companies on rewards packages.
He certainly acted honorably. But there is an inherent conflict between auditors and their advisory functions.
It is very difficult to be tough on salary agreements when audit fees and other consulting services are at stake.
Centrica president Scott Wheway and the board should have recognized that high salaries would do O’Shea and the group more harm than good.
keir smear
ITV debate’s effort by Sir Keir Starmer to attribute the great financial crisis to Rishi Sunak is implausible.
It could well be the case, as he claimed, that TCI, where Sunak worked, shorted the shares of Dutch financial group ABN Amro before it was bought by the Royal Bank of Scotland (RBS) in 2007.
In the run-up to the banking crisis, hedge funds were the canaries in the mine, detecting that European banks had foolishly loaded their balance sheets with worthless, chopped-up American subprime mortgages offering superior returns.
TCI should not be blamed for being smarter than low-octane banks and regulators. The missing piece in Labour’s narrative is the bidding war that brought RBS into the battle for control of ABN Amro.
Barclays, under the leadership of John Varley, intended to purchase the Dutch bank and even proposed moving the combined bank’s headquarters to Amsterdam.
RBS boss Fred ‘the Shred’ Goodwin couldn’t bear the thought of Barclays outgrowing his bank and struck a deal it couldn’t match, paying more than anticipated.
In the enthusiastic atmosphere, he had the backing of shareholders and a toothless regulator – created by New Labor – as the global banking system teetered on the brink of collapse.
What TCI had to do with Fred the Shred’s macho capitalism is a mystery.
Blaming Sunak for the demise of RBS and the £45bn cost of the government bailout is nonsense.
Fashion faux pas
One way the next Chancellor could repair the damage to the UK economy is by scrapping the tourist tax.
In the elevator at my gym I overheard an argument between two foreign women about purchasing a Max Mara trench coat. In London it was more than £600.
The prospective buyer called a friend in Paris, who was soon visiting London, and who bought it for €500 (£425.38).
Jeremy Hunt objected to restoring VAT exemption for foreign visitors. If Rachel Reeves, a “business-friendly” person, becomes Britain’s first female chancellor, she might recognize the mistake.